Forex Trading Compared to Stock Market Investing: Which is Best?

Finding the best way to make your money grow is one of the big challenges that you need to face up to at one point or another.

Finding the best way to make your money grow is one of the big challenges that you need to face up to at one point or another.

Choosing the right investment method can be the difference between having a comfortable lifestyle in the future and worrying about your finances.

With so many different types of investment to choose from, it can be daunting to get started. Therefore, it makes sense to choose a couple of investments and compare them. For example, would you be better with a stock market investment or by trading in the forex market?

Liquidity and Trading Hours

With stocks, it is all about the law of supply and demand. If you want to sell shares that no-one wants to buy then you either need to take a big financial hit or else wait patiently until they are in greater demand. This means that making your investment liquid can be an issue, especially for small investors.

On the other hand, forex trading offers greater liquidity. This is because you are trading currencies that have a huge supply and are always in demand. It is highly unlikely that you will run into liquidity issues in the same way that you could with stock market investing.

Another plus point in favour of forex for many investors is the fact that it offers 24-hour trading possibilities. You can get low spreads and fast execution on dozens of different pairs of currencies at any time when you trade forex over the internet.

The Research Needed

The truth is that both of these types of investment need a degree of research done on them if you are going to make a smart investment.

With the stock market, there are well over half a million companies listed in the different exchanges around the planet, with the New York Stock Exchange being the world’s biggest. The Johannesburg stock exchange (JSE Limited) is the biggest and oldest in Africa, with close to 500 companies listed on it.

This means that you will need to do a lot of research to check out even a limited amount of companies. The flip-side of this is that you probably have a feel for some companies that you already know something about for one reason or another.

In terms of forex trading, you are investing on one type of currency against another; Euro against US Dollar or Rand vs British Pound, for example. Since most people look at pairs of major currencies there are fewer different options to weigh up, but still enough variety to make it flexible and varied.

The Risks

There is no doubt that both stock market investing and forex trading involve risks which need to be researched and evaluated. Currency markets can be very volatile and the higher amount of leverage offered to forex traders increases the potential for earning or losing large amounts of money.

Lots of investors have made or lost a fortune on the stock markets over the years, with losses usually due to bad investment choices or the market crashing. Choosing established blue-chip companies reduces the risk but with the warning of a possible stock market crash on the horizon, it can’t completely remove it. The South African market has reached record levels this year despite fears of a strong correction.

How Easy Is It?

Finally, it is worth pointing out that both stock market and forex trading can be easily done online these days. You don’t need to be a financial genius or highly technical in order to set up an account and start trading on the type of investment that best suits you.